The United States Federal Reserve pursued its most aggressive interest rate tightening policy in nearly 20 years when it moved to tame inflation beginning in March 2022. That March 17, 2022 meeting saw the central bank execute a 25 basis-point rate hike. After that, the Federal Reserve would increase the benchmark rate from 0.50% after that March 2022 rate hike to 5.50%, when it executed its most recent rate hike of 25 basis points on July 26, 2023.
Citizens in the United States and across the developed world had taken advantage of historically low interest rates and the cheap credit that pervaded the financial system following the Great Recession. In that time, citizens have piled on debt. That has made many substantially overleveraged and ill-prepared for the reality of higher interest rates.
Some experts and analysts predicted that this environment may lead to another significant retreat in the U.S. housing market. Sales have softened markedly since the spring of 2022. However, prices have remained steady in many of the stronger markets in major metropolitan areas.
While some homeowners might look to exit their overleveraged positions, others may be more steadfast in holding onto their properties to maintain the interest rates that they were awarded prior to 2022. This could dissuade even individuals who are looking to upgrade or downgrade, as the benefits of such a move would theoretically be overridden by the substantial increase in mortgage rates in the present day.
